Due date for top heavy minimum

[R. Butler]

Top heavy minimum contributions were required for 2015, but they were not made until December 2016.  Are lost earnings required in this case.  If so what is the loss date?  I can' find anything that specifically spells this out.

 

Thanks for any guidance.

[John Feldt ERPA CPC QPA]

I don't see a contribution deadline for the top-heavy minimum in the code and regulations. You might not actually need to add missed earnings. Be careful about the timing of the deduction and the treatment for 415 limits.

[Bird]

Prior thread says end of the following year.  But I'm the one saying it, with no cite.  I'd be comfortable using that for loss calcs (i.e. no loss).  But as noted, be careful with annual additions and 415 limits.

[Lou S.]

If I recall correctly the deadline is 12 months after the plan year for top heavy minimum.

But you could have deduction and 415 implications making it in December.

 

[Tom Poje]

the notes I have are as follows:

What is the date by which a top heavy contribution must be made by when deductibility is not an issue? Does the plan sponsor have 12 months after the allocation date (like a QNEC made to correct an ADP failure) or 30 days after the §404 period ends (like an annual addition)?

Proposed response: The contribution should be made no later than 12 months after the end of the plan year.

IRS response: The IRS was uncomfortable with a 12 month deadline, but was comfortable with 30 days after the §404 deadline for making contributions for deduction purposes, or the Form 5500 filing date.

#49 Q and A 2004 American Bar Association

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Contributions made after the Section 415 timing date of 30 days after the tax return due date are considered to be annual additions for the following year. However, if consider the contribution a self-correction under EPCRS, it is permissible to relate this back to the earlier year. If the contribution is made after 12/31, you are clearly under EPCRS. [One of the exceptions to the 415 timing rule is an erroneous failure to allocate. See Treas. Reg. 1.415(c)-1(b)(6)(ii)(A).

EPCRS clearly treats post-415-period deposits that relate back to a prior plan year as an annual addition for the year to which it is meant to be paid, but EPCRS applies only after the 12/31/09 deadline. Therefore, there is a lack of guidance for the period between 30 days after the tax return due date and the end of the 12-month regulatory correction period.]

2010 ASPPA Q and A

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this gets into the nonsensical situation:. suppose you discover missing the top heavy on 10/15.  Gee, I'm not going to correct between now and 1/1 because then I can use EPCRS. but as indicated above, the problem is when exactly due you calculate the earnings as late (though the amount hopefully is small enough it won't matter)

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Section 9.05 example 1

QNECs on behalf of the excluded

employees, distributed the excess

deferrals to the affected participants,

and made a top-heavy minimum

contribution to all participants entitled

to that contribution for the 2006 plan

year. Each corrective contribution and

distribution was credited with Earnings

at a rate appropriate for the plan from

the date the corrective contribution or

distribution should have been made to

the date of correction

 

[RatherBeGolfing]

I'm having so much fun with calculations that I had to do some reading on this as well.  EOB pretty much agrees with Tom's notes it looks like (Ch. 3B - Part 2 - Section IV - Part A - Item 5).  The highlights from the section: 

1. There is not a specified due date for top heavy contributions
2. In order for the contribution to be deductible for a particular tax year of the employer, IRC §404(a)(6) requires that the contribution be made no later than the due date (including extensions) for filing the federal income tax return for such tax year. 
3. Under the IRC §415 regulations, an employer contribution is generally treated as an annual addition for a particular limitation year if it is actually made no later than 30 days following the due date (including extensions) of the federal income tax return for the employer’s taxable year in which the limitation year ends. See Treas. Reg. §1.415-6(b)(7). 
4. Use deduction deadline or IRC §415 deadline as informal deadline. If the two deadlines discussed above are used as an informal deadline, then top heavy contributions made after such dates should include an adjustment for lost earnings. A reasonable approach is to use the IRC §415 deadline if the employer has not made the contribution for any non-key employees and to use the deduction deadline if the employer has missed one or more, but not all, non-key employees in making the top heavy contribution. This approach also would be consistent with a reasonable approach for making employees “whole” through the self-correction mechanisms under the EPCRS program. In the latter case, the earlier deadline is used because other non-key employees had the benefit of the contribution by such deadline for earnings purposes.